Hot Holiday Toys Offer Entrepreneurial Opportunities

Whether it was the Hoola Hoop, collectible Barbies, Furbies, Cabbage Patch Kids or the original Atari games of the 1970s, there have always been "must have" toys and games that have generated a frenzy at local stores, especially around the holidays. Today, however, in a new age of consumerism, driven by an "absolutely must have at any cost" mentality, gamers, toy collectors and, in some cases, manipulated parents are not only pre-ordering the latest fun favorites but are bidding them up to 10 times their standard retail price on eBay.

This year, cashing in on shoppers' demands to have it "now" (or even sooner), retailers are touting their offerings earlier than ever by putting pre-order tickets in the hands of the buyers. But with much of the supply sold before the products even hit shelves, a secondary market is emerging: Smart sellers are capitalizing on the public's insatiable demand for these hot items by using the leverage they have as owner of one of the "golden tickets" to resell them for an exorbitant price--and pocket the difference.

Gearing Up for PS3 & Wii
The latest craze focuses on the forthcoming releases of Sony's PlayStation 3 on November 17 and Nintendo's Wii on November 19. Pre-orders at several leading retailers, including EB Games, Gamestop and Toys R Us, allowed those who got in under the early October deadline to secure consoles and even games for the new systems. Some of the early buyers are gaming enthusiasts, but others are "situational" entrepreneurs who are turning around and selling the consoles on eBay, where prices for the 20GB and 60GB PS3s are already topping $2,000 and rising.

Julian Georgescu, a gaming enthusiast who runs the website www.MyWii.com, says prices will most likely hit well over $3,000 by Christmas. "It's mostly hardcore gamers who are buying them at these prices," says Georgescu, who camped out overnight last month to pay a $50 deposit for his own pre-order Nintendo Wii. (For full disclosure purposes, you should know Georgescu also works for Entrepreneur.com.)

The retail prices for the 20GB and 60GB PS3s are $500 and $600, but "They're only shipping a limited number nationwide--I think it's around 400,000," offers Georgescu of the reason behind the pre-order frenzy. Nintendo, meanwhile, expects to sell some 4,000,000 units of the new Nintendo Wii by January. Despite that number, the $250 console has seen bids of $500 and up on eBay.

But it's not only gamers who are pre-ordering or bidding high prices on eBay. Collectors and parents are paying upwards of $200 for the TMX Elmo, Fisher-Price's new 10th anniversary Tickle Me Elmo doll, which, according to Fisher-Price, is still being manufactured and shipped on a regular basis since the opening-day shipments sold out in September. Unlike the Wii and the PS3, many stores didn't put the same stringent limits of "one per customer" on the $40 TMX Elmos, which explains why you'll find lots of 10 of the dolls on eBay with bids topping $1,000.

According to David Allmark, general manager of the Fisher-Price Friends division of Fisher-Price, "Fisher-Price is in the business of making children happy. This kind of activity makes it difficult for parents to purchase the toy at retail. Unfortunately, we have no control over point-of-purchase activity."

So What Does eBay Have to Say?
In an effort to stem the tide of pre-order exploitation, while keeping the door to free enterprise wide open, eBay has put specific requirements in place to control such sales. Along with their standard presale listing policies, which state that the seller must guarantee that the item will be available for shipping within 30 days of the date of purchase and that he or she will be able to ship it, they created new policies specifically for the PS3 and Wii sellers.

"We saw a high number of sellers when the XBOX 360 launched. And some well-intentioned sellers were unable to meet their presale obligations, so we've enacted some specific [requirements] for the PS3 and Wii," explains eBay spokesperson Cathrine England. "Only one of each console can be listed per eBay account prior to the launch with a photo of the pre-order receipt and description. The seller must also accept payment through PayPal and must have at least 50 feedbacks with a 98 percent or greater rating to qualify for buyer protection." England adds that eBay wants to continue to facilitate trade on the site but also wants to make sure consumers have a good buying experience.

But Pre-Orders Aren't for Everyone
"Retailers don't sell items to [have them] end up on eBay," says Jim Silver, editor in chief and co-publisher of Toy Wishes: The Ultimate Guide to Family Entertainment. "It's the reason retailers limit the quantity you can buy--they want the person to have it for their child or themselves. Manufacturers are also not at all encouraging that behavior."

Yet, in a capitalist society, reselling items has long been a tradition, for better or worse. A wide variety of collectors, as well as ticket brokers, have been among the advance sellers who, for years, have benefited when demand outweighs supply. The only difference today is that, thanks to the internet and the ability to attract numerous potential buyers (or bidders), advance selling can be done more efficiently and generate more money, because, after all, there's always someone willing to pay more for something that they--or their child--really, really want.

Rich Mintzer is a freelance journalist and the author of several business books. He lives with his family just 30 miles north of New York City in Mt. Kisco, New York.